TDS Challan & Payment Process: Complete Guide with Due Dates, Interest and Penalties

Introduction

Timely payment of Tax Deducted at Source (TDS) is a critical compliance requirement under the Income Tax Act. Even a small delay or mistake in challan payment can lead to interest, late fees, penalties, and notices from the Income Tax Department.

This blog explains the TDS challan and payment process in a simple and practical manner, covering:

• Challan ITNS 281
• Due dates for TDS payment
• Interest calculation at 1% and 1.5%
• Late fees and penalties
• Correction of wrong TDS challans

This module is especially useful for students, accountants, professionals, and business owners handling TDS compliance.

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What is TDS Challan ITNS 281?

Challan ITNS 281 is used for the payment of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) to the Central Government.

Purpose of Challan ITNS 281

• Deposit TDS deducted from payments
• Deposit TCS collected

• Applicable for payments made by:

1. Companies
2. Firms
3. Individuals
4. Other deductors

Key Details in Challan ITNS 281

• TAN of the deductor
• Assessment Year
• Nature of payment (TDS / TCS)
• Section under which TDS is deducted
• Amount of tax, interest, penalty (if any)

Correct selection of details is extremely important, as challan errors directly affect TDS returns.

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Due Dates for TDS Payment

TDS must be deposited within prescribed timelines, failing which interest and penalties apply.

Normal Due Dates

• For all months (April to February):
  → On or before 7th of the following month

• For TDS deducted in March:
  → On or before 30th April

Example

• TDS deducted on 15th June → Due date: 7th July
• TDS deducted on 20th March → Due date: 30th April

Timely payment ensures smooth filing of TDS returns and avoids unnecessary liabilities.

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Interest on Late Deduction or Late Payment of TDS

Interest is mandatory and cannot be waived.

Interest Rates

• 1% per month or part of a month
  → If TDS is not deducted on time

• 1.5% per month or part of a month
  → If TDS is deducted but not paid on time

Important Points

• Interest is calculated on a monthly basis, even for part of a month
• Interest is payable before filing the TDS return
• Non-payment of interest can result in return rejection

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Late Fee and Penalties Related to TDS Payment

Late Fee

• Delay in payment usually leads to delay in filing TDS returns, which attracts late fee
• Late fee is levied per day of delay, subject to limits prescribed under law

Penalties

Penalties may be imposed in cases of:

• Non-payment of TDS
• Short payment of TDS
• Incorrect challan details
• Continuous non-compliance

Penalty proceedings are separate from interest, meaning both can apply simultaneously.

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Correction of Wrong TDS Challan

Mistakes in challan payment are common but must be corrected promptly.

Common Challan Errors

• Wrong TAN entered
• Incorrect Assessment Year
• Wrong section selected
• Wrong nature of payment (TDS instead of TCS or vice versa)

How to Correct a Wrong Challan

• Online challan corrections can be requested through the TRACES portal

• Certain corrections may require:

  Approval from the Assessing Officer
• Supporting documents

• Correction is necessary before:

  Filing TDS return
• Claiming challan credit
• Uncorrected challans often lead to mismatch notices and demand.

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Practical Compliance Points

• Always verify TAN and section before challan payment
• Pay interest separately if applicable
• Do not wait for TDS return filing to identify challan errors
• Maintain proper challan records for reconciliation

Correct challan payment is the foundation of accurate TDS compliance.

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Conclusion

TDS challan payment is not just a routine task but a core compliance responsibility. Understanding Challan ITNS 281, adhering to due dates, correctly calculating interest, and promptly correcting errors can save deductors from heavy interest, penalties, and departmental notices.

A disciplined approach to TDS payment ensures smooth return filing, accurate credit to deductees, and long-term compliance confidence.

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Professional Support for TDS Compliance

Managing TDS challans, interest calculation, and corrections requires accuracy and continuous monitoring.

Verotus Finlegal Solutions LLP provides complete assistance for:

• TDS challan payment and reconciliation

• Interest and late fee calculation

• Wrong challan correction support

• End-to-end TDS compliance and advisory

📞 Contact Verotus Finlegal Solutions LLP

for reliable and hassle-free TDS management.